Oral Referral Agreements Between Attorneys—Make Sure They Are Confirmed In Retainer Agreement or Side Letter Copied to All Involved Attorneys for Plaintiffs

An oral referral agreement between attorneys—typically, where an attorney takes a plaintiff’s case and agrees to pay a percentage of the eventual recovery to the referring attorney—is enforceable.(Mink v. Maccabee, 121 Cal.App.4th 835, 838.) The only writing required is one signed by the client, consenting to the fee-shifting arrangement. (Ibid.; Rules of Prof. Conduct, rule 2-200.)As the next case demonstrates, however, prudence requires that the referral arrangement should be confirmed in a writing that is then transmitted to the client and all attorneys involved in the referral.

In Manley v. Burunsuzyan, Case No. B196369 (2d Dist., Div. 4 July 23, 2008) (unpublished), plaintiff attorney claimed that another attorney orally promised to give plaintiff 25% of the eventual contingency fee collected in a personal injury case commenced on behalf of plaintiff’s son.Plaintiff had son sign a handwritten note agreeing to a referral fee, but this note was never sent to the working attorney hired by the son.Nothing in the son-working attorney retainer agreement mentioned any referral fee.After working attorney successfully handled son’s suit and garnered a $880,000 contingency fee, plaintiff sued for breach of oral contract once working attorney refused to turn over a 25% piece to plaintiff.A jury trial ensued, with plaintiff, son, and plaintiff’s wife all testifying to the oral referral agreement.Working attorney denied any such agreement was made, pointing to the fact the client’s consenting “note” was never sent to him and emphasizing the obvious familial bias of all the supporting witnesses for plaintiff.The jury found there was no oral referral agreement, a determination affirmed on appeal by a 3-0 panel of the Second District, Division Four (in an unpublished opinion authored by Justice Willhite).This result reinforces the suggestion we make in the first paragraph of the post—get the referral agreement in writing and circulate it to all involved participants and the client.

We learned something from one of the claims of error.Over objection, the defense put on expert testimony about the custom and practice of putting referral agreements in writing, either in the retainer letter or a signed side letter.The appellate panel found this was error, although harmless error.For those practitioners interested in the authorities on this point, see Rabin v. Craft, 100 Cal.App.2d 808, 811 (1950) [custom and practice evidence can be used to interpret an agreement, but cannot be offered to prove a contract was made when the defense denies the existence of the agreement]; Williams v. Elliott, 127 Cal.App.2d 357, 364-365 (1954) [cannot be offered to show that plaintiff’s version of the terms of the contract were more probable than defendant’s version]; Dutton D. v. U.S.F.&G. Co., 136 Cal.App. 574, 576-579 (1934) [cannot be offered to show a lack of contract formation].